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NEWSROOM * CIRCULATION * ADVERTISING
Tuesday
February 2010
9
Community Blogs
Kyle and her husband moved to Brookfield in 1986. She became active in local politics and started blogging in 2004. Her focus is primarily on local issues but often includes state and national topics, too. Kyle looks at things from the taxpayers' perspective in a creative, yet down to earth way, addressing them from a practical point of view.
TANSTAAFL, Mr. Congressman; TANSTAAFL, Mr. Obama!
One of the first lessons we learned while studying Economics in our home school was "Tanstaafl, the Romans and Us." It was chapter 2 in Richard Maybury's book, Whatever Happened to Penny Candy? The book is simply written but contains invaluable information on the principles of economics and how the world works. Too bad it isn't required reading for every President, Legislator, Judge, Cabinet Member and Czar.
So, what is TANSTAAFL? Tanstaafl stands for: "There Ain't No Such Thing As A Free Lunch." It was a very popular saying during the Great Depression.
Tanstaafl is a law of economics--a fact of life--yet our government and president, in particular, seem to have never learned about it. It says that everything of value carries a cost, or put another way, nothing of value is free. "Someone must pay for it, if not with money, then with time and hard work."
The author, Richard Maybury, then cites the example of the air we breathe--even clean air isn't free because "people work hard and spend lots of money to keep it clean enough to breathe." (Just ask the folks at WE Energies or any manufacturer.)
Chapter 2 opens by discussing the double-digit inflation of the 1970s and early 1980s--the Carter years, something our nation had not really experienced before. (Exception being the Confederate dollar during the Civil War era.) Maybury then compares what went on in ancient Rome with our economic woes. Imagine if this book was written today? The US Deficit just hit $1 TRILLION dollars, a new all time high, and could reach $1.8 or so Trillion by year's end.
Ancient Rome was famous for its road system and wars to conquer other nations. Both of those things require money. Lots of money. Public works projects and a large standing army require funding. How do you do that?
Tax the people, right? Rome was also famous for its taxes. (Remember the Christmas story? Mary and Joseph had to go to Bethlehem to be taxed and counted in the census?)
Well, to pay taxes, you have to have some sort of job. Hence, another thing we have in common with the Roman Empire; they had a large welfare program.
So Rome had public works projects, a large standing army, and welfare to fund, but very little actual manufacturing or productivity in their country. You can only tax so much--even if you are Rome!
The Emperors knew that too high a tax rate might result in revolt, not polite Tea Parties, but actual revolt. Today, we would just inflate the money supply by printing more money. They used silver coins so they solved the problem by clipping off the edge of each coin collected in taxes and then melting the clipped parts to mint more coins. Of course the money was not worth a full Denarius anymore, but the Roman government did it anyway. They wanted to fund their wish list of public works, army, and welfare programs to keep the unemployed masses happy. They hoped nobody would notice.
But the merchants did notice. After a few close shaves, the coins were noticeably smaller and lighter. Merchants started to refuse clipped money or required 2 clipped coins for one real one. The currency was DEBASED.
DEBASING currencies and INFLATION go hand in hand. Not just in Rome but in the USA. At its extreme, this is what happened in pre WW2 Germany, where a wheelbarrow of German Marks was needed to purchase a loaf of bread.
Today, Europe and China are concerned about how much we have inflated our money supply. Our Secretary of the Treasury was laughed at in China when he told them the dollar was secure. Savvy Americans are concerned too. That is why you hear so much talk of investing in gold.
The only ones that don't really believe in TANSTAAFL are the politicians proposing one costly measure after another without the ability to pay for it: TARP under President Bush, and now President Obama's BAIL-OUTS, STIMULUS 1, CAP and TRADE, NATIONAL HEALTH CARE, and now talk of STIMULUS 2.
Keep TANSTAAFL in mind. It applies to all aspects of life. Everything has a cost, whether it is money, time, effort, loss of quality of life. Nothing is free; someone always pays for it.
Just like the laws of Physics that state you cannot create energy out of nothing, you cannot create money out of nothing either, not even to fund unprecedented government spending. It's because TANSTAAFL.
If you have not called your Senators, do so. (I heard that Kohl was showing signs of weakening on Cap and Trade on Marl Levin last night?) A polite call is the most effective and I make sure they take my name. I urged them both to oppose Cap and Trade, Health Care Reform and threw in opposing Sotomayor too.
US Senate Members
Senator Herb Kohl: (202) 224-5653, Senator Russ Feingold: (202) 224-5323
More reading:
545 people I wish would read "Whatever Happened to Penny Candy" Rounding the 'net: The 545 people responsible for all of America's woes
Vice President Biden should read it too: "We Have to Go Spend Money to Keep From Going Bankrupt"
Past Post: I'm going into the wheelbarrow biz, or the "Peso-fication of the US$
Links:
Brookfield7, Fairly Conservative, BetterBrookfield, Vicki McKenna, Jay Weber, The Right View Wisconsin, Randy Melchert, Mark Levin, The Heritage Foundation, CNS News
"So Rome had public works projects, a large standing army, and welfare to fund, but very little actual manufacturing or productivity in their country."
Yeh but this is postmodernity and we are informed by postmodern globalism in which we are the managers, financial wizards, and reapers of the harvest while the remainder of the world are $0.20 per hour worker drones.
This paradigm has been espoused and exploited by both the demicans and republocrats over the past decade or two. And it is clearly the one driving politics today.
Need a worker? Hire some cheap immigrant on a work visa. Need a job? Hold on, another stimulus is on the way and Al Franken is the delivery boy!
So..., all I have to do is sit around, demand more welfare and wait for the checks to flood in.
Kyle, You are never going to become mayor with your archaic political philosophy. Jeeze!
Which Rome are you talking about? Rome the rebuplic, Imperial Rome or the fantasy Rome depicted in that great work of fiction called the bible? The reason I ask is because your analysis of Rome is off the mark and I want to address your analysis of Rome from the proper historical perspective.
Santa's Elf, you crack me up! I got a good laugh from your last line. :)
LB: The question of which Rome I was writing about should have been evident: there were NO Emperors during the Republic era. They did form a Triumvirate of Pompey, Caesar and Crassus in 60BC. War hero Julius Caesar was named Dictator after he won the Gallic wars, but he was assassinated in 44BC. His adopted son, Octavian took power in 27BC and became the first emperor. So this post was about the Empire era, which began with Octavian, the Republic was no more. Octavian is Augustus, the same Caesar Augustus of the Bible.
There is no need to always insult other's beliefs. If you believed in God, you would know that someday you will be held responsible for what you say.
You deny the bible is fiction?
I am not about to answer such a foolish question, but if you would like to have a serious theological discussion with me, I would be happy to meet with you over coffee or a soda. I would even buy.
As for any future, serious questions, please email them to me, for I will not be answering them on the comments page.
Calling Tweety Bird! Calling Tweety Bird!
Tweets, I think it's time to take our infantile fellow reader LB on one of those "Faith alone" Harley rides of yours.
I'm guessing that by the time you run er up past 120 on I94, he'll be feeling the the rush of wind over his bare scalp and the Spirit deep within his soul!
What an evangelism ministry!
I want to understand Prast's position here: So the deficit is heading toward $2 trillion, and suddenly we care because the democrats are in the majority and in the White House? The way to fix it is by opposing cap and trade and reform in health care? We can all understand that we are in the current mess because of an ongoing and experimental adventure in Iraq and the consequences of years of irresponsible lending and borrowing to fuel a speculative housing bubble.
There are at least two things that either me or Prast (or both of us!) very confused: economics and health care. I'll try to spell out where I am coming from below.
First on economics: While I do not have much of a background on the subject, Prast’s naivety is particularly telling. Economics is not “just like” physics. Money is not conserved (like energy) and we do create money “out of nothing”, through (for example) the banking industry. A properly functioning economy creates money responsibly, and grows responsibly.
So are we creating money responsibly? I don’t know. I don’t believe that Prast does either. Mrs. Prast, I will be happy to be proved wrong here. Just point us to the post (from, say two years ago) where you predicted the collapse of the housing bubble leading to the collapse in banking that has helped to fuel the largest economic downturn in 80 years. The fact is, left-leaning and right-leaning economists were warning about what has happened. And those same economists are advising that stimulus spending is the quickest (and cheapest) path to recovery.
Yes, we are ultimately going to have to pay for it. There is no such thing as a free lunch. The whole country (indeed, the whole world) dug itself into this mess. Getting out is going to take some shared *responsibility*.
Second on health care: Exactly how is opposing health care reform going to help the deficit? Medicare alone cost a half trillion a year (and growing). Heck, you could almost buy yourself an Iraq War for what Medicare costs every year! The ten-year cost of the prescription drug benefit alone will be around $1.2 trillion.
Spending (and waste) on health care is out of control. Yet we are urged to call our senators to oppose health care reform in order to save money?!? (I thought there is no such thing as a free lunch.)
Ah, LB's temperment in all these BrookfieldNOW posts now make sense! Our good friend El Gato should enjoy entering this banter.
The CBO expects Obama's healthcare plan to add a big chunk to the deficit in the next few years. I know it's not important since you've already made up your mind, dbeardda, but it's what's currently being reported.
In case you are really slow, that's how opposing healthcare reform is going to help the deficit.
You failed the economics quiz, by the way. The government creates money out of nothing every time they expand the federal reserve balance sheet. In colloquial terms, it's call "printing money." You have no background in economics, but you label Kyle naive. How typical.
A group of us including Kyle sat around my kitchen table during the last mayoral campaign and discussed how Brookfield's economic gladtimes would not last. We all saw the run up and expected the decline in property values and slowdown in tax base. Maybe we were just smarter than everyone else, but I doubt it. What happened wasn't very hard to predict. But then we were just a group of people content to live within our means.
Finally, have you seen the deficit predictions under Obama? Educate yourself, please.
Why, clk_53045 are you SURE you read before you typed?
Kyle Prast: "Just like the laws of Physics that state you cannot create energy out of nothing, you cannot create money out of nothing either"
dbearda: "Prast’s naivety is particularly telling. Economics is not “just like” physics. Money is not conserved (like energy) and we do create money “out of nothing”, through (for example) the banking industry."
clk_53045: "You failed the economics quiz, by the way. The government creates money out of nothing every time they expand the federal reserve balance sheet."
And before you put on the tinfoil hat and spread innuendo like manure, I am not "dbearda" nor do I know who is.
"And those same economists are advising that stimulus spending is the quickest (and cheapest) path to recovery."
dbeardda, meet Dr. Ron Paul!
While much of what you've said resonates well with me, I do respect Dr. Paul's consistent statements decrying stimulus spending as a way to get the economy going.
If you follow the logic of this story, you know that we arrived here through an abhorrent misuse of credit on the part of individuals, banks, and lending institutions. How then, I ask, do we expect to solve the problem through an equally abhorrent misuse of credit on the part of government through deficit spending?
With regard to what can and cannot be created by government through it's fed banking scheme, I'd offer the notion that while government certainly has created money out of nothing, the tendency for inflation to follow close behind demonstrates that while money was indeed created, lasting value was not.
But lasting value is the only specie that counts. So if, in ten years, you'd like a pound of beef steak with which to feed the family, be prepared now to have on hand then specie of sufficient value with which to buy the steak.
Current policy does not solve today's problem. It simply attempts to put the problem off for another generation to solve. The price of their steak will include the interest incurred by our stimulus spending in deficit. The steak will retain it's lasting value. But it's price will sky rocket.
The joke's on us and they've just added a new comedian to the senate to assist in telling it to us!
I thought my point was fairly obvious, that you cannot create money out of nothing...successfully. Creating money out of nothing, such as the Romans did by clipping the coins, had dire consequences. Our expansion of the money supply, creating money from nothing, will have dire consequences too, inflation being one of them.
Maybe the Keynesian economists think spending money you don't have will stimulate the economy, but not all economists are Keynesian! Just ask Congressman Paul Ryan, an economist, what he thinks of all this spending.
I am not sure what dbeardda is referring to with the blog from 2 years ago? I did write this one over a year ago: The 3 RS: Recession, Rising Energy Prices, and Referendum. http://blogs.mycommunitynow.com/practically_speaking/archive/2008/03/31/the-3-rs-recession-rising-energy-prices-and-referendum.aspx
Scott, thanks for pointing out that that clk "failed" the reading comprehension test. At risk of ganging up on the pour soul, let me add...
me: "So are we creating money responsibly? I don’t know. I don’t believe that Prast does either."
clk_53045: "I know it's not important since you've already made up your mind, dbeardda...Educate yourself, please."
Well at least he said "please" :)
Kyle: My point was (and is), that if we are going to consider taking your advice on economic policy, you might point us to where you knew something that wasn't in the headlines of every newspaper. What I am looking for is some evidence of some credibility on the subject. Sorry to pick on you, but you are making some serious claims and from an implied position of authority: "Our expansion of the money supply, creating money from nothing, will have dire consequences too, inflation being one of them."
I hope you are wrong. And I hope you hope you are wrong.
Expanding money supply resulting in inflation is not a theory, it's history! What's to prove!
I am not an economist. I don't claim to know where the economy is headed. But I do *know* that, even accounting this current recession, we have had a quarter century of growth with inflation effectively controlled. A simple search reveals that the highest inflation since 1982 was a rate of 5.39% in 1990. The average inflation rate for the past 25 years is 2.94%. Meanwhile the economy was growing, and presumably will grow again, all the time "expanding the money supply."
So, I guess we are against growth now.
What is really sickening to me is this kind of shameless pride in ignorance. I don't want to pick on "Santas Elf" because I really think it's a trend. Can it really be that all the brains and education and serious thought have been ceded to the party in power. I happen to think that we could use a responsible opposition. But I am afraid that we will not be able to construct one.
We have already seen the "conservative" position on science in a recent post from Prast. To sum up: If we don't like what the scientists say, we'll either dig our heads into the sand and/or find our own kooks who come to more ideologically satisfying conclusions. Well guess what: there are essentially no scientists nor people who listen to scientists left voting for the GOP.
Now what's the economic position? You are against growth (at least as long as a democrat is president)? What happens when the sky doesn't fall, as you are predicting, and the economy turns around? Probably nothing and you will just find some new sign of the imminent apocalypse.
So you have lost the rationalist, you are rapidly losing the businessman, you are not exactly attracting the social progressive. Who is going to be left in the big tent?
True, I am not an economist, just a Home Economist. Whoever said I was against growth? I am against growing spending, growing the deficit, growing taxes, growing government, but certainly not growing the economy through real means like encouraging businesses.
What do we have, the 2nd highest cooperate tax rate in the world? Is it any wonder companies are leaving our country for greener pastures?
You might not know this, but Wisconsin just passed Combined Reporting, now companies that do business here and in other states are looking at leaving WI too. Ireland, just across the way has low corporate tax rates, that helped their economy grow.
Small businessmen are quaking in their boots over mandated health care. The idea to "tax the rich", which would include the small businessman, and increasing energy prices through Cap and Trade aren't helping them either.
I sincerely hope "the sky doesn't fall" but considering the credit card debt most Americans carry (something I have written about over 2 years ago) and now the 2nd round of foreclosures due to unemployment and the predictions of unsustainability from the Democrat run CBO itself, I don't see how it cannot "fall"? Of course, that is just the humble opinion of a housewife in Brookfield, WI.
My understanding is that the Irish Tiger is dead and that Ireland is fairing worse than the US or the rest of EU zone.
Regarding the corporate tax rate, I wonder what the effective corporate tax rate is in the US, and if it is lower than that of Ireland. I bet it's lower in the US; but that is just a hunch. I do know that my official federal income tax rate (33%) is more that twice the effective rate that we actually pay. A more extreme example is when Warren Buffett's secretary pays a higher tax rate than he does.
It seems like corporations can do even more than most individuals to manipulate their effective tax rates. Hence the motivation for "combined reporting". Do states with combined reporting laws tend to have higher unemployment, lower incomes, etc? If not, then it doesn't seem like something to worry about. If so, then it might be because business that can better hide their income succeed more. To me, that doesn't make a strong argument against more transparent accounting. To me, it reinforces the argument for more transparent accounting everywhere.
So there is a cause to get behind: how about a fair and simple tax structure for corporations and individuals? An anti-tax crusade is a waste of time, particularly when the anti-tax party just borrowed a trillion dollars for a war they couldn't finish.
Regarding health care, the problem is, somebody has to pay for it. Currently care is largely subsidized by the government, through entitlement programs and tax subsidies to both private insurers and policy holders. If you have a job, but don't have health insurance, you are still paying for other people's coverage. So one of the core problems is that there is a net flow of health care dollars from the poorer to the wealthier. Anybody with a sense of justice would have to agree that it is unconscionable to maintain the status quo. Yet I don't believe anything will get fixed until the federal system becomes entirely insolvent.
So why are costs so much higher in the US than the rest of the world? Why does mandated care have businesses "quaking in their boots"? The answer to the second question is because we have to ask the first question. Your example of a low-tax country (Ireland) has nationalized health care, as does the UK and all of the EU, where my family and I have been spending the past couple of months. Here they kill the two birds---overall costs and costs to business---with one stone---nationalized health care.
In most of the civilized world the idea of paying out of pocket for health care is barbaric, and they can hardly believe that we do it in the US. I can assure you that the quality of care is every bit as good down the road from me at the Cambridge University Hospital as it is back home at my own institution. (I am a professor at MCW.) So why can they do it so much cheaper here? One reason is of course taking the profit out of the system. But the major difference is in how medicine is practiced. Here physicians earn a decent salary. In the US, a physician is an entrepreneur, responsible for generating his or her revenue. A urologist, for example, here in the UK is paid a salary and makes a comfortable living. An established urologist in most places in the US ought to be making a million dollars a year. Physicians' multi-million dollar annual earnings are a big source of what has your businessman quaking in his boots over health care.
We do have some clinics in the US that operate closely to the UK model (such as the Mayo, and our own Marshfield Clinic in Wisconsin). Apparently Massachusetts is thinking about operating along these lines statewide (http://www.nytimes.com/2009/07/17/health/policy/17masshealth.html). Yet there is nothing at the federal level that looks anything like real reform. So your fears are probably valid: we may very well mandate coverage, but do nothing about the skyrocketing costs. So far that looks like where we are headed.
Whoa, I did blow that one didn't I? Mea Culpa.
Goodness knows it's important to through Mr. Berg a bone now and then. How else would he find his way out of all that manure?
I found the <a href=http://meganmcardle.theatlantic.com/archives/2009/05/the_risk_of_debt.php>chart I was thinking of regarding Obama's deficits</a>.
Wow dbeardda. That would make you Dr. Ann B. Nattinger, AKA Contrarian, wife of former Elmbrook School Board president Bruce.
http://www.mcw.edu/PCOR/Faculty/Nattinger.htm
I thought your argumentative style was just too darn familiar. Did you ever think of sticking to medicine? I can only imagine your bedside manner after reading you here.
"In the US, a physician is an entrepreneur, responsible for generating his or her revenue."
Yup, and in the UK a medical school education including all the bells and whistles costs the student but a few pence. Here, medical schools top a couple hundred K, excluding the bells and whistles.
So under the bdeardda plan, how's the American doctor going to recover his educational cost, live, and finance a retirement knocking down $25K a year?
I doubt she's worried. Her bills are paid off and retirement is settled. That will be the next generation's burden.
BTW Ann, tell Bruce I just figured out who Peter/Richard must be.
Have fun over the pond for the rest of your time there. We'll all still be here when you get back. You might as well take a few days off.
My goodness, you people (clk and elf) really are wearing tin foil hats.
At least your mouth is cleaner than your husbands.
If history holds true you'll back off for a few months. We can all use the respite.
"I am not "dbearda" nor do I know who is."
The man obviously knows much more than he's revealing here. Could he possibly be part of the socialist conspiracy which is driving dbeardda to her bizarre statements? Good grief, the whole pack of them are Al Franken supporters. A politician and a professor: sounds like Madison to me!
Oh Ronny Reagan, where are you?
A friend notified me of this blog and postings stream this morning, 20 July 2009. Neither Ann nor I have posted any entries under any name nor have participated in any manner in this forum.
Bruce Nattinger
Well then, that's that. Right?
Credit is not a new phenomonon for the government or anyone else for that matter. Both the government, business, and the individual have proven each cannot handle it.
The federal government while led by either conservative or liberal has borrowed its way through the day for survival for many years now. To now claim that Bush's failed policies or Obama's flawed policies are what has caused the economic downturn or will now result in catastrophe is naiive and simplistic. Those seeds were sown long ago.
By the way, the Roman's economy, even under the imperialist form of government was driven by slave labor.
- Can't say I came away from mayoral forum with, That's the one!
- Elmbrook School Board At-Large Candidate Forum: Tuesday, Feb. 2
- Pre-primary Mayoral Forums: 1 down, 1 today, 1 Feb. 4th
- Ted Kanavas not seeking reelection for STATE Senate
- "Purpose Precedes Creation" presentation Tuesday, Jan. 26, 7:30pm
- MoveON.org asking members to attend Sensenbrenner Town Hall Saturday
- Feingold has got to go & Sensenbrenner, was that a hint?
- So thankful Brown won!
- Brown needs healthy margin to win Massachusetts to beat possible fraud
- Watching Massachusetts Senate race with great interest
Tags: Common sense : History : President Obama : TAXES : THE ECONOMY : Government / Bureaucracy
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